SINGAPORE, Dec 4 Asian shares slipped on Tuesday
after a plunge in U.S. manufacturing activity hit Wall Street
stocks and the dollar, while the euro hovered near a six-week
high on optimism over Greece's plan to buy back debt.

Declines in Asian stock markets suggested caution setting in
after gains in recent weeks, with investors reluctant to chase
shares higher amid continued gridlock in the U.S. Congress over
proposals to avert the so-called fiscal cliff - $600 billion
worth of tax increases and spending cuts that will be
automatically triggered in early 2013.

European shares were expected to open lower, U.S. stock
index futures eased and riskier assets such as commodities were
also hit, with oil, copper and gold all losing ground.

"Oil markets are starting to come off on the
weaker-than-expected manufacturing data and the fact that the
U.S. economic outlook remains unclear," said Natalie Rampono,
commodity strategist at ANZ in Sydney.

"We are also seeing mixed headlines on the fiscal cliff
negotiations, so markets have already taken on a cautious
outlook on that account."

Global share indexes had risen on Monday after manufacturing
surveys showed signs of a recovery, albeit an uneven one, in
China's economy and a slower contraction in Europe. But
sentiment toward equities soured after data revealed U.S.
manufacturing unexpectedly contracted in November to its lowest
level in more than three years.

The Institute for Supply Management (ISM) said on Monday
that its index of national factory activity fell to 49.5 in
November, the weakest since July 2009, as companies worried
about whether lawmakers in Washington could reach a budget deal
in time to avert a fiscal crisis that may lead to a recession.

Heading into next week, even a hint of progress in the
fiscal cliff negotiations could spawn a modest rally, said
Vishnu Varathan, regional economist in Singapore for Mizuho
Corporate Bank.

"Overall the euro zone noises are coming out positive and I
don't see any turning around there. The only real deal-breaker,
whatever will send the dollar spiking up and risk really off the
table, will be if there is a complete breakdown in the Congress
negotiations," he said.

"Right now there is some disappointment here and there, but
overall still the consensus is that negotiations will result in
some kind of acceptable compromise," Varathan said.

RBA CUTS

The Australian dollar recovered from initial
weakness on Tuesday after a widely expected interest rate cut by
the Reserve Bank of Australia (RBA). The rate was trimmed by 25
basis points to 3.0 percent, matching the previous record low.

The RBA said the full impact of rate cuts in the past had
yet to be felt, and that recent data confirmed the peak in
resource investment was approaching.

The Aussie rose 0.2 percent on the day and last traded at
$1.0440, not far from a two-month peak of $1.0491 touched last
week.

The euro was flat around $1.3060, hovering near the
previous day's high of $1.3076, the single currency's strongest
level in about six weeks.

The euro gained as Greek bonds rallied on Monday after
Athens announced better-than-expected terms for its planned debt
buy-back, boosting chances it will succeed and lead to the
release of fresh aid funds.

The U.S. fiscal cliff issue remained in the minds of many
investors, underpinning the Treasury market, where benchmark
10-year yields held steady in Asian trading around
1.628 percent.

Brent crude slipped 0.3 percent to around $110.60 a
barrel and gold fell nearly 1 percent towards $1,700 an
ounce. Copper fell from the first time in four sessions, coming
off a six-week high reached on Monday to drop below $8,000 a
tonne.

The White House dismissed a proposal from congressional
Republicans on Monday that included tax reforms and spending
cuts, saying it did not meet President Barack Obama's pledge to
raise taxes on the wealthiest Americans.

The Republicans proposed overhauling the U.S. tax code to
raise $800 billion in new revenue over 10 years. Obama's opening
bid, outlined last Friday, seeks $1.6 trillion in new revenue by
allowing the expiry of tax cuts enacted under President George
W. Bush for the top two tax brackets.

"Now that the both sides have put out their plans on the
table, we can say at least the negotiation is starting. But the
way it looks, it will be difficult to get any deal by the second
week of December. Probably it's going to take until the third
week," said Tomoaki Shishido, fixed income analyst at Nomura
Securities.

Next In Economic News

HELSINKI, Dec 9 Greece's plan for a one-off
payout to pensioners before Christmas has not been consulted
with the country's lenders and raises questions if Athens can
return to markets before the end of the bailout, the head of the
euro zone bailout fund ESM said.

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